Tuesday, April 6, 2010

Taxation versus Crime

I was surprised to discover how badly neglected the direct link between taxation and crime is.

Criminals commit crime because they perceive that crime pays. Conversely, the more rewarding legitimate work is, the more limited the rewards of sacrificing legitimacy are, in both quality and quantity. Anything that reduces that reward is going to directly stimulate crime. All this can be derived more or less a priori.

I've only found one place discussing this link, and the data look bad to me. Beyond the simple confirm/deny dichotomy, different types of crime will respond to variance in payoff differently.

This means a few things. Even setting aside anarcho-capitalist flavoured violations of property rights, raising taxes has an inescapable odour of immorality. Even setting aside corruption, government waste not only wastes the honest dollar, it creates new dishonest dollars. (Though I stress that rewards, both honest and dishonest, need not be financial.)

Finally, a patchwork would not end up taxing at the Laffer maximum, because a patch with lower taxation will inevitably have a lower crime rate, thus attracting immigration, all else equal. Competition implies market implies consumer goodies.